Taiwan Bond Yield Drops Toward Six-Week Low; Currency Advances

Taiwan’s government bonds gained, with the five-year yield dropping toward a six-week low, as investors sought safety in sovereign debt amid signs the local economy is weakening. The local dollar rose.

Export orders slumped 6.6 percent in March from a year earlier, official data showed yesterday, compared with the median estimate in a Bloomberg survey for a 1.9 percent increase. The jobless rate was at 4.18 percent, up from 4.16 percent a month earlier. Overseas shipments are equivalent to about two-thirds of the island’s gross domestic product.

“The road to higher growth this year is very bumpy,” said Samson Tu, a Taipei-based fund manager at Uni-President Assets Management Corp., which oversees $700 million. “We’re still not getting a clear direction from fundamentals. It’s causing more volatilities in the bond market.”

The yield on the 0.875 percent notes due January 2018 fell one basis point to 0.926 percent as of 9:58 a.m. in Taipei, according to Gretai Securities Market prices. The rate touched 0.918 percent on April 18, the lowest level since March 8.

The central bank will sell NT$30 billion ($1 billion) of 20-year bonds today at 1.84 percent, according to the median estimate of fixed-income traders in a Bloomberg survey.

The Taiwan dollar climbed 0.2 percent to NT$29.82 against its U.S. counterpart, Taipei Forex Inc. prices show. It was little changed one minute before the 4 p.m. close yesterday and finished 0.1 percent weaker. The central bank has sold the local dollar in the run-up to the close on most days in the past year, according to traders who asked not to be identified.

Currency Forwards

One-month non-deliverable forwards rose 0.1 percent to NT$29.788 per dollar, according to data compiled by Bloomberg. The contracts touched NT$30.10 on April 9, the weakest level since July 27.

One-month implied volatility in the Taiwan dollar, a gauge of expected moves in the exchange rate used to price options, slipped two basis points, or 0.02 percentage point, to 3.42 percent, according to data compiled by Bloomberg.

The overnight interbank lending rate was little changed at 0.388 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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